@ ere 
Ve : ' 


Tie fat 
Ai kh ae ~~) 


State of Rhode Island and Providence Plantatinns? 


SPECIAL REPORT 


OF THE 


ti. 


JOINT SPECIAL COMMITTEE 


yt 
“eo 
Ve la 
\ \ + \ 


ON THE 


TAXATION. LAWS 


OF THE 


State of Rhode Island 


TO 


HIS. EXCELLENCY 
Poo ieetie nave POD PLE R 


@nuernnr 


Aucust Toth, A Dito rr, 


PROVIDENCE: ™ 
EK. L. FREEMAN COMPANY, STATE PRINTERS 
6 1911. 


\ PLL 


Letter from the Chairman of the Committee to the Governor, in r 


Report of the Committee. 


THIS REE GRT oe 


Record from the Journal of the Senate, May pa OT! 
Record from the Journal of the Senate, May 10, 1911. 
Opinion of the Attorney General. 
Letter from His Excellency the Governor to the Ghisan of a. Cor m 


regulation of taxation; and amending Ciel 39, 57, 58, 
215 of the General Laws.” 


son 


tag 
wt 


+ 


lor? Nn fs 


Ie 


—— 


RECORD FROM JOURNAL OF THE HOUSE OF REPRESENTATIVES. 


From the calendar: Special order at 12:30 o’clock P. M. 


(H 90) Act for the appointment of a State Tax Commissioner and to define 
his duties, and for a State tax upon corporations. 


Committee on Judiciary recommends indefinite postponement of original Act 
and passage of Substitute A. 


Substitute A is read. 


Certain amendments introduced by Mr. Burchard, on behalf of the Committee 
on Judiciary, are read, and Mr. Colton moves that the Act be referred to the 
Joint Special Committee on the Taxation Laws of the State, with instructions 
further to consider the subject, to give public hearings, and to report to the next 
General Assembly bills equitably taxing all corporations created by, or doing 
business in this State. 

Mr. Burchard raises a point of order that a motion to refer to the committee 
mentioned is not privileged to the precedence contemplated in Rule 21. 

The point of order being declared to be not well taken, the Honorable Speaker 
is sustained in his ruling on appeal therefrom by Mr. Burchard. 

The Act is referred to the Joint Special Committee on the Taxation Laws of the 
State, with instructions mentioned in the motion by Mr. Colton, by vote of 
54 ayes and 42 noes on roll call asked by Mr. James B. Littlefield and others, 
as follows: Aye, 54; No, 42; Absent and not voting, 4.—From House Journal, 
Friday, April 21, 1911. 


RECORD FROM JOURNAL OF THE SENATE. 


Senator Atchison, from the Committee on Finance, reports back with recom- 
mendation of passage, (S 179) resolution to provide compensation to the Joint 
Special Committee on Taxation Laws, and continuing said committee for purpose 
of further investigation. Read and passed.—From Senate Journal, Friday, 
May 4, 1911. 


From the Houes of Representatives: Message from His Excellency the Gover- 
nor (condition of state finances) received and referred to the Joint Special Com- 
mittee on Taxation Laws by a vote of 22 ayes to 8 noes, a roll call being had upon 
request of Senator Munroe.—From Senate Journal, Wednesday, May 10, 1911. 


OPINION OF THE ATTORNEY GENE RAM 


OFFICE OF THE ATTORNEY GENERAL, PROVIDENCE County Court Hovuss, 


PROVIDENCE, R. I., May 16th, 1911. 
Epwarp P. Tosrs, Hsa., 


Clerk of Joint Special Committee on Taxation Laws of the State. 


Dear Sir:—I am in receipt of your request for my opinion as to whether or 
not the Joint Special Committee on the Taxation Laws of the State is still in 
existence. 

I find that the Joint Special Committee on the Taxation Laws of the State was 
created by resolution passed May 6th, 1909, and under such resolution it con- 
sisted of two members of the Senate and three members of the House of Repre- 
sentatives. This committee was continued by joint resolution approved August 
19th, 1910, and directed to report at the January session of the General Assembly 
of 1911. 

At the January session, 1911, the House of Representatives, on April 21st, 
referred an act for the appointment of a State Tax Commissioner and to define 
his duties, and for a state tax upon corporations, to the Joint Special Committee 
on the Taxation Laws of the State, with instructions further to consider the 
subject and give public hearings, and report to the next General Assembly bills 
equitably taxing all corporations created by or doing business in this State. This 
was the action of the House alone, and was not transmitted to the Senate. 

The Senate on May 5th, passed a resolution to provide compensation to the 
Joint Special Committee on Taxation Laws, and continuing said committee for 
the purpose of further investigation. This was not passed by the House. 

On May 10th, the Senate received a special message from the Governor on the 
condition of the State’s finances, and referred the same to the Joint Special 
Committee on Taxation Laws. 

In my opinion the committee was legally constituted in the first instance, and 
legally continued in 1910. The resolution continuing the committee is as follows: 

“‘ Resolved, that the Joint Special Committee on the Taxation Laws of the State, 
appointed under authority of a resolution of the General Assembly passed May 
6th, A. D. 1909, ‘for the purpose of taking into consideration the laws of the State 


REPORT ON TAXATION LAWS. 5 


relative to taxation,’ be and the same is hereby continued for purposes of further 
consideration and investigation of said subject, with all the powers and duties 
vested in said committee under said resolution; and said committee is hereby 
directed to make further report of its proceedings, together with such recom- 
mendations as it may deem advisable, at the January session of the General 
Assembly, A. D. 1911.” 

The language of this resolution is very broad, and continued the committee 
with all the powers it originally possessed. The additional duty was laid upon 
the committee to report at the January session of the General Assembly, A. D. 
1911. In my opinion the additional duty imposed upon it by the last clause of 
the resolution does not so limit the powers and the continuance of the committee 
that the committee ceases to exist when that duty is performed. The clear 
meaning of the resolution, in my opinion, is to generally continue the committee 
until it is discharged from further duty by the General Assembly, or until it has 
no duties to perform. 

Such a construction of the meaning and intent of the resolution continuing 
the committee is supported and emphasized by the action of both branches of the 
General Assembly of 1911. There is, what might be termed, a legislative con- 
struction of the continuance of the committee by the acts of each branch sepa- 
rately in referring to this committee certain matters which call for action on the 
part of the committee, and in the case of the House accompanied by directions 
to do certain specified things. I have the honor to advise the committee that in 
my opinion both because of the form of the resolution of 1910, and because of 
the construction placed upon it by the General Assembly of 1911, the Joint 
Special Committee on the Taxation Laws of the State is still in existence, clothed 
with the powers given it by the General Assembly. 


Very respectfully, 
WILLIAM B. GREENOUGH, 


Attorney General. 


LETTER FROM HIS EXCELLENCY THE GOVERNOR - TO: 
THE CHAIRMAN OF THE COMMITTEE. 


STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS. 


EXECUTIVE DEPARTMENT, PROVIDENCE. 
July 21, 1911. 
Hon. Ropert 8. FRANKLIN, 


Chairman Joint Special Committee on Taxation Laws, Newport, R. I. 


Dear Str:—At the time of the adjournment of the January session of the- 
present General Assembly, you will recall that in conversation with yourself 
and other members of the Joint Special Committee on Taxation Laws, I urged 
that the committee undertake at once the further consideration of the subject 
of taxation, and the preparation of a bill which should conform as nearly as pos-- 
sible to the lines suggested in the resolution passed by the House of Representa-- 
tives, which called for a bill providing an equitable tax upon all corporations. 
created by or doing business in this State. 

This resolution of the House of Representatives directed your committee to: 
report to the next General Assembly; but in view of the fact that many important. 
activities of the State have been crippled seriously for several weeks past owing. 
to the lack of provision for adequate revenue, and as improvements in the taxa- 
tion laws of the State which will more nearly equalize the burdens of government. 
are demanded by every consideration of public expediency, I would respectfully 
request that your committee advise me as soon as possible what progress is. 
being made, and what has been accomplished in the way of preparing a bill that 
will overcome, in any degree, the objections raised against the measures before- 
the General Assembly at the January Session. 

Awaiting a reply at your earliest convenience, 


Yours very truly, 


A. J. POVHIiiie 


Governor. 


LETTER FROM THE CHAIRMAN OF THE COMMITTEE 
Oo SPE; GOVERNOR: 


STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS. 
JOINT SPEcIAL CoMMITTEE ON TaxaTION Laws, 


PROVIDENCE, R. I., August 3, 1911. 
Hon. Aram J. Potuinr, 


Governor of Rhode Island, 
Woonsocket, R. I. 


Your Excellency—Complying with the request contained in your letter 
addressed to me as chairman of the joint special committee on taxation laws, under 
date of July 21, I have the honor to submit to you the following statement of the 
progress made by said committee since the adjournment of the January session 
of the General Assembly, in the preparation of a bill providing for a system of 


State and local taxation and for ‘ 


‘an equitable tax upon all corporations created 
by or doing business in this State,” as called for by the vote of the House of Repre- 
sentatives, recorded in the House Journal, April 21, 1911. 

Immediately after the adjournment of the General Assembly the committee 
undertook the work assigned to it. The committee first proceeded to arrange a 
series of conferences with members of the General Assembly, attorneys, and 
others who had been active in bringing forward objections to the tax measures 
which the committee had recommended for passage at the January session, and 
which had been before the Assembly for consideration. The purpose of these 
conferences was to determine, if possible, the basis for and validity of the objec- 
tions offered; to ascertain wherein the provisions of the proposed measures were 
inadequate or inequitable, and to obtain the views of those who had offered 
criticisms, as to what additions and alterations they consider necessary in order 
to so redraft them that they would measure up to the standard required by the 
House of Representatives as expressed in the vote of that body. 

Some of these conferences took place at formal meetings of the committee 
at which several persons appeared by invitation. Others, where convenience 
could thus be best served, were in the nature of informal discussions with indi- 
vidual members of the committee. In two instances the committee’s invititions 
were declined, but the members of the committee feel that they were not essen- 
tially handicapped in their quest for information on that account. 


23 on REPORT ON TAXATION LAWS. 


The suggestions submitted to the committee as the result of these conferences: 
which seemed to call for serious consideration, were that provision be made for 
a State tax upon steam railroads; a tax upon telegraph, telephone and express 
companies more in keeping with the amount of business these companies are 
believed to be doing in this State; a State tax upon the commercial business of 
banks and trust companies which would place them as nearly as possible upon the 
same basis for taxation as manufacturing and mercantile corporations; and a State 
tax based upon the value of the product upon leased oyster beds. 

Various methods of executing some of the above suggestions were discussed 
by the committee with those who appeared to advocate them, all of which were 
carefully weighed by the committee in its subsequent investigations, in examin- 
‘ing the laws of other States and in its efforts to determine which particular method 
was best adapted to the conditions peculiar to Rhode Island. 

With a view to overcoming one objection, frequently raised, to vesting in a 
single commissioner the administration of a State tax department, a section has. 
been drawn to provide for a board of three commissioners, ultimately for six- 
year terms, with the term of one commissioner expiring every two years. The 
tendency to this form of centralized supervision over taxation matters is unques- 
tionably established and is spreading throughout the States. New Hampshire 
has now adopted this policy, the General Court of 1911 having passed an act 
creating a permanent State tax commission of three members, which act received 
the approval of the Governor on April 15 last. The clause authorizing the ap- 
pointment of this New Hampshire commission provides that one member ‘‘shall 
be of the leading minority party,” and the section above referred to contains, in 
effect, a similar provision. 

The committee believes that the section imposing a State tax on the gross 
receipts of steam railroads proposed by the judiciary committee of the House of 
Representatives, if it is to be incorporated in the bill, should be amended by sub- 
stituting for the rate of four-tenths of 1 per centum a rate of 1 per centum—the 
rate assessed on the gross receipts of telegraph and telephone companies. | 

In determining the question of an equitable tax on telegraph and telephone 
companies several considerations of public expediency confronted the committee. 
Different states have adopted different methods, and the committee spent some’ 
time investigating them and in determining which would be best adapted to 
Rhode Island. Connecticut imposes a tax of 25 cents on each mile of wire, 
and also assesses telephone companies $1.10 for each transmitter in use. The 
method of taxing wire mileage and telephone instruments did not, upon investi- 
gation, seem to promise better results than the tax of 1 per cent. on gross receipts 


already in operation in Rhode Island. 


REPORT ON TAXATION LAWS. 9g 


The committee can see no good reason, however, for exempting these companies 
from a local tax on their poles and wires under the general property tax, and 
therefore suggests omitting this provision in the existing law, thus making the 
tangible property of these companies subject to local assessment. 

The committee suggests an amendment to the law taxing the gross receipts 
of express companies on business transacted within this State by increasing the 
rate from 1 per centum, the present rate, to 5 per centum. It believes this is not 
inequitable, in view of the fact that the law does not reach interstate business, 
and that the property of such companies used exclusively in the express business 
is exempted. This suggestion follows closely the Connecticut law, which imposes 
the proposed rate, 5 per centum, except in the case of companies conducting an 
express business wholly on lines of electric or street railways, which are taxed 2 
per centum on the same basis. 

The committee is now pursuing a line of investigation by which it hopes soon 
to arrive at a satisfactory conclusion as to the relative merits of the gross receipts 
method of taxing these public service corporations which do an interstate business, 
and a method which assesses a tax on the proportionate value of the assets of such 
corporations in this State under the unit system of valuation. The committee 
expects very soon to be in a position to advise Your Excellency which of these 
methods seems to be better adapted to conditions in Rhode Island, and as soon 
as this question is settled satisfactorily in the minds of the members of the com- 
mittee the draft of a general tax bill, upon which the committee is now at work, 
can be completed. 

In considering the suggestion that the value of the product upon leased oyster 
beds should be taxed the committee found nothing in the existing law to-prevent 
the assessment and collection of such a tax. The present law regards the oysters 
on leased beds as personal property of the lessee. The committee accordingly 
suggests the incorporation into the bill of a section providing for a tax of 1 per 
cent. on the value of the product upon leased oyster beds, to be assessed by the 
Commissioners of Shell Fisheries on a valuation based on statements filed with 
them by the lessees annually, subject, however, to revision by said commissioners, 
and to be paid to them and by them turned over to the General Treasurer. In 
providing for the assessment and collection of this tax by the Commissioners of 
Shell Fisheries rather than by the Tax Commission, the committee feels that 
such a method would better enable the first-named body to regulate the shellfish 
industry in Rhode Island. 

The committee is convinced that if its recommendations originally made are 
supplemented by the provisions now suggested, sufficient revenue will be received 


to warrant the immediate reduction of the State tax upon the several cities and 
2 


10 | | WwSitk om 


towns from 18 cents to 9 cents on each $100 of valuation. Based on 
of the State tax for the big aM this reduction Hicks mean a a 


REPORT OR MC OVEM TIDE hy. 


To His Excellency, Aram J. Pothier, Governor: 


The Joint Special Committee on Taxation Laws, acting in com- 
pliance with the expressed wish of Your Excellency, and in pursuance 
of the request contained in your letter addressed to the chairman of 
the committee under date of July 21, 1911, to which reply was made 
by the chairman under sanction of the committee on August 3, 1911, 
herewith submits a further report of the progress made in the prepa- 
ration of a tax bill intended to meet the objections raised to the 
measures before the General Assembly at the January session, 1911, 
together with a draft of a bill for your consideration. 

The committee desires first to direct attention to the extracts from 
the journals of the Honorable Senate and the Honorable House of 
Representatives accompanying this report, the same being the record 
of the action taken by these two bodies wherein certain matters were 
referred to and certain additional duties imposed upon this committee; 
also to the opinion of the Attorney General as to the status of the 
committee. 

The committee has continued the study of the subject of taxation 
in furtherance of the desires of the House of Representatives as 
declared in the vote of that body in the belief and with the feeling 
that it was their duty as citizens to assist, by every possible means, 
in the solution of a problem with the intricacies of which an investi- 
gation covering a period of more than two years had made them 
somewhat familiar, especially in view of the expressed wish of Your 
Excellency that this work be promptly resumed upon the adjourn- 
ment of the January session of the General Assembly, and diligently 
prosecuted. 

The members of the committee who have taken part in its delibera- 


12 REPORT ON TAXATION LAWS. 


tions since May 16th last, concur in the recommendations set forth 
in this report, as embodied in the accompanying bill, the draft of 
which was first prepared by Mr. Bowen, as a sub-committee, and 
afterwards considered by the committee. 

The first consideration before the committee when it undertook 
to carry out the injunction of the House of Representatives, and 
prepare a bill “equitably taxing all corporations created by or doing 
business in this State,’ was with regard to the form of tax which 
would most readily adjust itself to all classes of corporations. ‘The 
practice of taxing the income or receipts of public service corporations, 
which appears to have been productive of satisfactory results in 
regulating an excise or franchise tax, threatened to meet with serious 
difficulties and objections when applied to manufacturing and mer- 
cantile corporations. 

Whatever the income tax plan may have to commend it from a 
theoretical point of view, the fact that its application to all the cor- 
porate activities of the State would, in order to be effective, neces- 
sitate the filing of complete statements of their business every year, 
including salary and other accounts, and a practical exposition of the 
entire business of many manufacturing enterprises, with all the ob- 
jectionable features that would be sure to accompany such a system, 
seemed to the committee to give promise of so much opposition to 
such a requirement that the idea was discarded as inexpedient. 

The committee therefore turned its attention to the study of the 
practicability of adapting the corporate excess system, which it has 
heretofore recommended for manufacturing: and mercantile cor- 
porations, to corporations of all classes, including public service 
corporations, applying the unit system of valuation in determining 
the proportion of tax which should be assessed in this State upon the 
corporate excess of these corporations which do an inter-state 
business. From estimates carefully made upon this basis the com- 
mittee has reached the conclusion that the application of this system 
to all corporations, joint stock companies and associations doing 
business for profit in this State, with the necessary legal adjustment 


REPORT ON TAXATION LAWS. kt 


for national banks, will result equitably, lending itself with facility 
to our industrial and economic conditions. With the slight differ- 
ences in the method of assessment and collection necessitated in 
certain cases by provisions of the federal statutes, all classes of 
corporations can be taxed equitably and with substantial equality, 
as set forth in the accompanying bill. 

The committee is also satisfied that this extension of taxation to 
all classes of corporations will so effectively reach the untaxed wealth | 
in this State that a further reduction in the proposed rate can be safely 
recommended. The rate therefore has been fixed in the bill at 30 
cents on each $100 of excess value of corporate property, a rate 
which, for example, if applied horizontally to all securities, would 
amount to a tax of only one-twentieth of the income froma six per 
cent. investment. But as this rate is applied merely to the excess 
value of corporate property over and above the assessed value of 
real estate, tangible personal property and other exempted assets, 
the rate in proportion to the value of the total securities of a corpora- 
tion becomes in many cases almost negligible. 

The annual report of the United States Commissioner of Internal 
Revenue for the fiscal year ended June 380, 1910, gave the combined 
capital stock of the 2,011 Rhode Island corporations making returns 
in that year as $223,883,866.94; the combined bonded and other 
indebtedness as $148,039,572.85; and the net income as $37,670,- 
744.438, or 16.82 per cent. of the capital stock. It does not seem 
unfair to assume, from these figures, that the market value of this 
stock is at least twice par, on which basis the dividend would be at 
the rate of 8.41 per cent. 

Assuming, then, that the market value of this stock is $447,767,- 
733.88, or twice par, and that of the bonded and other indebtedness is 
approximately par, a total security value is indicated on this basis of 
$590,807,306.73, an amount which exceeds the entire valuation of the 
State for all classes of property in that year by over fifty-four millions 
of dollars. If the assessed valuation of the real estate and other 
tangible assests of these corporations reaches in amount one-third 


14 REPORT ON TAXATION LAWS. 


of the total valuation of the State, which is believed to be a liberal 
allowance, the deduction of that sum from the indicated security 
value would leave a corporate excess of $411,958,992, which at the 
rate of 30 cents on each $100 gives an estimated revenue of $1,235,- 
876.97. 

The committee has incorporated into the bill a provision reducing 
the State tax upon the assessed valuation of cities and towns, from the 
present rate of 18 cents on each $100, to nine cents. The committee 
is confident that the returns to the State the first year under the 
operation of this act, not only will justify this reduction in the State 
tax, but will make it possible to do away entirely with the present 
system of levying upon the town and city treasuries for the support 
of the State government, should it be deemed advisable. 

It is difficult to see how any valid objection can be raised to the 
principle on which this bill is drawn, when it is clearly realized how 
widespread will be the benefits to the State, to the towns, and to 
citizens of all classes, which will result from its adoption by the 
General Assembly. 

Every share of stock, and every bond, in every corporation, subject 
to the provisions of this bill will become exempt from taxation in the 
hands of residents of this State as soon as the act goes into effect. 
Not only will the holders of such securities be relieved from any 
necessity which they may now feel of concealing their true financial 
condition from the local assessors in order to escape the injustice of 
the general property tax, but they will also experience a similar relief 
with relation to all their other intangible holdings, whether mortgages 
or securities in foreign corporations not affected by Rhode Island 
laws. 

Partnerships and individuals, equally with corporations, will be 
subject to the tax of 30 cents on each $100 assessed valuation of their 
intangible property, under a provision which the committee has 
incorporated in its draft. The tax in these instances is assessed and 
collected by the cities and towns for local purposes. This provision 
clarifies one objection raised to the measure before the General 


REPORT ON TAXATION LAWS. co 


Assembly at the January session, which was to the effect that it 
discriminated against corporations by taxing them under a method 
which would compel payment, and leaving partnerships under the 
general property tax with the same facility for, and incentive to, 
evasion that now exists. It is believed that the low and entirely 
reasonable rate proposed in this bill for the intangible property of 
partnerships and individuals, a rate equivalent to 5 per cent. on the 
income from a 6 per cent. investment, will result in the uncovering 
of sufficient taxable wealth locally, which heretofore has escaped 
taxation, to more than compensate for the difference in rate, as has 
been demonstrated by experience in other states, and will retain 
domestic and attract foreign capital to this State. 

In substituting the unit system of valuation in a property tax, for 
the gross receipts method of taxing inter-state public service cor- 
porations, the committee has also opened up additional sources of 
revenue for the towns, by making property heretofore exempt by 
law available for local taxation. ‘This is particularly true in the case 
of telephone, telegraph and express companies which are not now 
assessed upon poles or wires or other personal estate used exclusively 
in their respective lines of business. 

The unit system of valuation also admits of the assessment of a tax 
which is more truly a property tax—which reaches the stocks, bonds 
and securities of corporations that are not now reached. It has been 
approved by the Supreme Court of the United States and isin use in 
many states throughout the country. 

By adopting this system of valuation it has been possible for the 
committee to bring the steam railroads within the general provisions 
of the corporate excess tax. What the revenue from the steam roads 
will amount to can only be estimated until it is possible to determine 
accurately the exemptions that will have to be deducted in the case of 
each road or corporation. 

The report of the railroad commissioner for 1910 shows that the sev- 
eral steam railroad corporations doing business in this State have a 
paid-up capital stock of $172,562,525, and a funded debt of $249,- 


16 REPORT ON TAXATION LAWS. 


923,003. The dividends paid last year on the stock of the principal 
roads ranged from 6 per cent. to 10 per cent. Estimating the 
market value of the stock and bonds of these railroads roughly at 
$500,000,000, and basing Rhode Island’s share of this property on 
its proportion of approximately one-tenth the total mileage, and 
deducting the $20,000,000, in round numbers, for which the roads 
are assessed on real estate and tangible personal property in the 
cities and towns, there remains about $30,000,000 of corporate excess 
taxable in Rhode Island, which at the rate of 30 cents on each $100 
would yield some $90,000 annually from this source. 

The same system is applied in the case of dining, parlor, chair, and 
sleeping car companies, telegraph, telephone, express and holding 
companies doing an interstate business, except that in the case of the 
two latter classes the gross receipts are necessarily made the basis 
of comparison instead of mileage. 

It will be noticed that the corporate excess tax is made to apply 
also to street railways. Under the act as drawn every street railway 
company, in the opinion of the committee, will be subject to this 
provision, irrespective of any question that may be raised concerning 
any contract with the State under the provisions of Chapter 216 of 
the General Laws, which continues in force the provisions of Chapter 
580 of the Public Laws, passed June 15, 1898. For section 1 of said 
Chapter 216 provides that the specific payments provided in that 
chapter shall be ‘‘in lieu and satisfaction of all other taxes 
excepting . . . such as may hereafter be imposed generally and 
without discrimination upon the property, income, rights, privileges 
or franchises of all persons and corporations.”’ 

The rate of 30 cents upon each $100 of intangible property stipu- 
lated in the accompanying bill is ‘imposed generally and without 
discrimination”? upon the otherwise untaxed intangible property of 
all corporations, associations, partnerships and persons alike, any 
difference in the manner of assessment and collection not impairing 
the substantial equality of the tax. 


REPORT ON TAXATION LAWS. ig 


The differences in the manner of assessment and collection already 
noted are in the cases of partnerships and individuals, who are 
assessed by the towns, and from whom the tax is collected locally. 
Another difference occurs in the case of banks, as will be seen by 
reference to the bill. 

Under the Revised Statutes of the United States (Sec. 5219) the 
right of a State to tax national banks is confined to taxation of the 
shares belonging to the holders thereof, and the rate must not be 
greater than is assessed on other moneyed capital in the hands of 
individual citizens of that state; the shares of non-resident holders 
must be taxed in the city or town where the bank is located. 

The case of Owensboro National Bank v. Owensboro, 173 U. &., 
664, 669, decides that under the existing law a state tax on the cor- 
porate excess of national banks is an attempted state tax on the 
capital of the bank rather than on the shares, and is void. 

So it is impossible, apparently, under the present federal law, to 
tax the corporate excess of national banks in Rhode Island, and the 
construction of the federal statute by the United States Supreme 
Court requires that national banks be taxed in substantially the same 
manner as state banks; and until the laws are changed the method 
of taxing the shares in the hands of the holders must necessarily be 
followed. 

In the case of National Bank v. Commonwealth (U. 8. Supreme 
Court), 9 Wallace, 353, 361, it was held that a tax on the shares of a 
national bank can be collected by the State and paid to the municipal 
authorities, and so this method, in the case of non-resident stock- 
holders, will satisfy the requirements of the federal law. It was also 
decided, in the case of Aberdeen First National Bank v. Chehalis Co., 
166 U. 8., 440, that the bank may be required to collect the whole 
tax as agent of the state, with the right to pay the same out of the 
individual profit account or accounts of such shareholders, or their 
transferees, in proportion to their ownership, or to charge such tax 
to the expense account, or to pay it out of the funds of the bank 


generally. 
3 


18 REPORT ON TAXATION LAWS. 


The committee has therefore treated trust companies, state banks 
and national banks alike in prescribing the method of paying what 
in law is not the same, but what in fact is similar to a tax on their 
corporate eXCess. 

The present State tax of 40 cents on each $100 of deposits in 
savings banks and in the participation accounts of banks and trust 
companies, has been reduced in the bill submitted herewith to the 
corporate excess and intangible personalty rate of 30 cents. This 
reduction seems equitable to the committee in that it provides as 
low a rate on the savings of the poor as upon the investments of the 
rich. It also appears to be necessary in order to comply with the 
peculiar provisions forbidding discrimination in the law governing the 
taxation of street railways having a contract with the State, and thus 
make it possible to reach such street railways with the corporate 
excess tax. 

Based on the receipts from the tax on savings deposits in 1910 the 
substitution of the rate of 30 cents on each $100 of such deposits 
will reduce the revenue to the State from this source $121,000, 
which sum there is every reason to believe will be largely, if not 
quite, made up by the taxation of bank shares under the plan outlined 
above. 

A provision has been embodied in the bill making the corporate 
excess tax a lien on the real estate of corporations, in the same 
manner as other taxes are made a lien on real estate under the 
existing laws of the State. A lien is also given to all banks and trust 
companies on the shares of each shareholder for the amount of his 
proportionate share of the tax paid by the corporation. 

The inequality in the excise taxation of stock and mutual insurance 
companies 1s materially lessened, although not entirely removed, by 
the provision of the bill making the local rate on intangible personal 
property 30 cents on each $100. 

Following the suggestions of those who have expressed themselves 
as of the belief that the oyster grounds held under lease in waters 
controlled by the State should be subjected to some form of tax, the 


REPORT ON TAXATION LAWS. 19 


committee has incorporated a provision assessing such grounds at a 
rate of one per cent., based upon the valuation of the personal prop- 
erty thereon belonging to the lessees, the valuation to be determined 
by the commissioners of shell fisheries, from returns made annually 
by the lessees to said commissioners. It is provided that this tax 
shall be paid to the commissioners and turned over to the General 
Treasurer. It is estimated that this tax will yield an annual reve- 
nue to the State of upwards of $30,000. 

From the estimated revenue on corporate excess there must be 
deducted, under the provisions of the bill here noted, the losses in 
State revenue which will result from the reduction in the State tax 
of one-half, and the reduction of one-quarter in the amount annually 
received from the tax on savings deposits and participation accounts. 
There is to be added, also, the estimated amount to be received from 
the tax based on the valuation of leased oyster grounds. 

The committee is of the opinion that the present law under which 
the salary and certain other expenses of the railroad commissioner 
are borne by the corporations owning or operating railroads within 
this State, should be repealed, believing not only that this expense 
logically belongs to the State, but that its continued imposition upon 
the railroad corporations might raise a question as to the taxation of 
street railway companies under this act. A provision effecting such 
repeal has accordingly been embodied in the bill. 

The committee believes that it has evolved a method of taxing all 
corporations and corporate securities fairly, and that corporations 
of all classes will find it to their advantage to pay the low rate im- 
posed, which exempts their securities in the hands of the holder. 
The assessment of all intangible property at a uniform rate, aside 
from any question of an excise or franchise tax, provides an equitable 
property tax on all corporations, partnerships and individuals. 
With this provision for absolute equality, any attempt at evasion of 
the tax by changing from one form of carrying on business to another 
form will be futile, under proper administration of the laws. Resort 


20 REPORT ON TAXATION LAWS. 


to apparent change of ownership of securities likewise would be 
futile, as the tax is paid by or through the corporation itself. 

The committee believes that objections to the general provisions 
of this bill will be few, while not unmindful of the fact that unstated 
considerations may, perhaps, continue to prompt efforts for the 
further postponement of legislation so sorely needed. It is confident 
that public spirit and a sense of justice will sustain the development 
of a system of taxation in this State which so manifestly distributes 
the burdens of government with justice and facility. 

The tendency towards centralized supervision of taxation matters 
throughout the United States is evidenced by the legislative history 
of 1911. Three states—New Hampshire, North: Dakota, and 
Colorado—have created permanent state tax commissions since last 
January. The legislature of the State of Utah enacted a law this 
year creating a commission to revise the revenue laws of that state. 

The bill herewith submitted recognizes clearly the principle of 
interstate comity. Ultimately complete co-operation among the 
states in taxing wealth at its source will bring about a condition 
where all property will be fully and equitably taxed once—a condition 
which will remove the argument for an inheritance tax as a means 
for uncovering concealed wealth, leaving such a tax only where needed 
as a secondary source of revenue. 

No state in the Union would more readily adjust itself to a corpora- 
tion tax, in the opinion of the committee, than Rhode Island. The 
alternative of a tax on land values has been freely advocated here; 
but Rhode Island already feels too heavy a burden upon its real 
estate under the present general property tax. To shift any further 
proportion of the burden from industrial wealth to the homes and 
farms in city and town, would be at variance with every principle of 
equitable taxation. 

The committee was directed, under the vote of the House of 
Representatives, to give public hearings, but it has considered the 
present season not well suited to the purpose. 

To summarize, the bill submitted by the committee provides: 


REPORT ON TAXATION LAWS. 21 


1. A State tax on the excess valuation of corporate property, 
applicable to all corporations generally, wherever incorporated, 
carrying on business for profit in this State, at the reduced rate of 
30 cents on each $100. 


2. The determination of that proportion of the excess valuation 
of inter-state public service corporations which should be taxed in 
Rhode Island, by applying the unit system of valuation; thus making 
possible the extension of property taxation at a uniform rate to all 
classes of corporations—industrial, manufacturing, mercantile, bank- 
ing, commercial, and railroad, telegraph, telephone, express and other 
public service corporations. 


3. The reduction of the present State tax on savings deposits 
and participation accounts of banks and trust companies, 40 cents 
on each $100, to 30 cents. 


4. The extension of this rate of 30 cents on each $100 to the 
intangible property of partnerships and individuals (including mort- 
gages). | 

5. The application of the corporate excess tax to street railway 
companies, irrespective of any question of contract with the State 
under Chapter 216 of the General Laws, made possible by the adop- 
tion of this uniform rate upon the intangible property of all persons 
and corporations without discrimination. 


6. The reduction of the State tax of 18 cents on each $100 of 
assessed valuation of cities and towns, to 9 cents. 


7. The taxation of the excess valuation of the shares of national 
banks, state banks and trust companies in the hands of the holders, 
as required by the federal statutes, at the corporate excess rate, 
30 cents on each $100. 


8. The exemption of all stocks, bonds and other securities of 
corporations, subject to a tax on their corporate excess, from taxation 
in the hands of the holder by local assessors. 


22 REPORT ON TAXATION LAWS. 


9. The taxation of tangible personal property where located. 


10. The release from exemption, under the unit system of valua- 
tion, of poles, wires, and other personal estate of telegraph, telephone 
and express companies, making this property available for local 
taxation purposes. 


11. A State tax of one per cent. based on the valuation of leased 
oyster grounds controlled by the State. 


12. The constituting of the corporate excess tax a lien on the real 
estate of corporations, and the tax on bank shares a lien on the shares. 
of each shareholder for the amount of his share of the tax. 


13. The repeal of the provision in the General Laws assessing 
the corporations owning or operating railroads within this State for 
the salary and other expenses of the railroad commissioner. 


14. The creation of a non-partisan State Tax Commission of three 
members to carry out the general provisions of the bill, and to 
exercise Supervisory powers over taxation matters. 


Respectfully submitted on behalf of the committee, 


ROBERT 8. FRANKLIN, 


Chairman. 


AN ACT for the Appointment of a Board 
of Tax Commissioners and to Define 
Their Duties; for a State Tax upon Cor- 
porations; for the Regulation of Taxa- 
tion; and Amending Chapters Thirty- 
nine, Fifty-seven, Fifty-eight, Sixty, Two 
Hundred Three, and Two Hundred Fif- 
teen of the General Laws. 


It is enacted by the General Assembly as follows: 
BOARD OF TAX COMMISSIONERS. 

Section 1. There shall be a board of tax commissioners for 
2 the state consisting of three qualified electors, who shall be 
3 severally sworn to the faithful performance of the duties enum- 
4 erated in this act and such others as are or may be from time to 
5 time prescribed by law, and who shall hold office for the terms of 
6 their appointment or until their successors respectively shall be 
7 appointed and qualified to act. At the present session of the 
8 general assembly the governor, with the advice and consent of the - 
9 ae shall appoint three persons to be members of the board of 


10 tax commissioners who shall not all be of the same political party; 


24 


ak 


12 


13 


14 


15 


16 


17 


18 


Lo 


20 


2. 


— 


22 


23 


24 


25 


26 


27 


28 


29 


REPORT ON TAXATION LAWS. 
one to hold office until the first day of February, A. D. 1918, one 
to hold office until the first day of February, A. D. 1916, and one 
to hold office until the first day of February, A, D. 1914. The 
governor shall designate one of the members of said honed SO ap- 
pointed by him at the present session of the general assembly as 
chairman of said board, and thereafter the members thereof shall 
elect one of their number as chairman upon the appointment of 
any new member for a full term. In the month of January, 
A. D. 1914, and in the month of January in each second year 
thereafter, the governor, with the advice and consent of the 
senate, shall appoint one commissioner to hold office until the 
first day of February in the sixth year after his appointment, to 
succeed the commissioner whose term will next expire. Any 
vacancy which may occur in said board when the senate is not in 
session shall be filled by the governor until the next session thereof, | 
when he shall, with the advice and consent of the senate, appoint 
some qualified elector to fill such vacancy for the remainder of 
the term. Said commissioners, or any of them, may be removed 


by the governor for cause shown, and with the advice and consent 


30 of the senate. Each commissioner shall receive, in full compen- 


dl 


32 


10 


17 


18 


REPORT ON TAXATION LAWS. 25 
sation for his services, an annual salary of three thousand dollars. 
Said board shall have an office in the state house, which shall be as- 
signed for the purpose by the board of state house commissioners. 

Sec. 2. Immediately upon the appointment and qualification 
of the first board of tax commissioners under the provisions of 
section 1 of this act, the members thereof shall proceed to elect 
one of their number as secretary. Said board may employ such 
clerical assistance as may be from time to time required, and shall 
be allowed for the payment thereof, and for office expenses and 
other actual expenses incurred by said board, its members or its 
assistants in travelling and in the performance of official duties, 
the sum of twenty-five hundred dollars annually, or so much 
thereof as may be necessary, which sum is hereby annually 
appropriated for said purpose. The state auditor is hereby 
directed to draw his orders upon the general treasurer from time 
to time for the payment of the salaries of the commissioners, upon 
vouchers approved by the chairman, and shall also draw his 
orders upon the general treasurer from time to time for such 
clerical hire and expenses, upon vouchers approved by the chair- 
man, to be paid out of any moneys in the treasury not otherwise 


appropriated. 
4 


26 REPORT ON TAXATION LAWS. 
Src. 3. The board of tax commissioners shall have general 
.2 charge and control over the assessment of taxes, payable directly 

3 to the general treasurer, other than those paid by any city or 

4 town, except so far as such taxes are now or may be hereafter 

5 assessed or fixed by special state officers or commissioners other 

6 than the general treasurer; and all reports upon which any such 

7 tax is based, except those made to. said special state officers or 

8 commissioners, shall be made to said board. 

9 In all cases in which said board shall assess or determine the 
10 amount of any such tax the board shall certify the senha to the 
11 general treasurer for collection. 

Sec. 4. The commissioners may visit any city or town to 

2 inspect the work of local assessors, and to confer with, advise, 

3 and give them such information and request of them such action 

4 as will tend to produce uniformity in valuation and assessment 

5 throughout the state. 

Sec. 5. The board of tax commissioners shall cause to be 

2 prepared, at the expense of the state, uniform blanks, for the 

3 assessment rolls of each town, providing for the separate assess- 


4 ment of the different classes of property of each taxpayer required 


10 


11 


REPORT ON TAXATION LAWS. 27 
by law to be separately assessed; and the tax assessors of each 
city and town shall make their respective assessment rolls upon 
such blanks, and shall annually in each year, not less than thirty 
days before the first day upon which town taxes become payable, 
make report to said board of the amount of the several classes 


of property so assessed by them in such form as the board may 


require. 
Sec. 6. The tax assessors of each city and town shall also 
furnish to the commissioners, upon request, such other information 


from their records relating to taxes, assessments, and exemptions 
from taxation, as the commissioners may deem necessary for the 


performance of their duties. 


Sec. 7. .The board of tax commissioners shall report annually 
to the governor, who shall present such report to the general 
assembly within the first two weeks of its January session, show- 
ing the amount of tax assessed upon corporations, companies, 
firms, and individuals paying taxes directly to the general treas- 
urer, classified according to the several statutes under which such 
taxes are paid; the amount of taxable property in each city and 


town of the state, in tabulated form, distinguishing the several 


28 REPORT ON TAXATION LAWS. 

| 9 classes thereof, with the rates of taxation; and the amount of 
10 property in each city and town exempt from taxation, and the 
11 causes of exemption; together with any recommendations for the 
12 better assessment and collection of taxes which said board may 


13 deem necessary or advisable. 


Sac. 8. Whenever in any proceeding in court, by appeal or 
2 otherwise, the constitutionality or construction of any tax statute 
3 or the validity of the assessment of any tax is questioned, the 
4 court before which such proceeding is pending shall not proceed 
5 with the hearing thereof until opportunity has been afforded the 
6 board of tax commissioners to appear and be heard with reference 
7 thereto. 


TAXATION OF CORPORATIONS. 


Sec. 9. Every corporation and joint stock company or asso- 

2 ciation,wherever incorporated, carrying on business for profit in 
3 this state, all hereinafter, throughout this act, referred to under 

4 the term ‘‘corporation,’’ except as hereinafter provided, in addi- 

5 tion to taxes on its real estate and tangible personal property locally 

6 or otherwise assessed, shall pay an annual tax to the state upon the 


7 value of its intangible property, and for the determination of the 


8 


9 


10 


11 


12 


13 


14 


15 


REPORT ON TAXATION LAWS. 29 
amount of such tax shall, on or before the first day of March in 
each year, return to the board of tax commissioners, under the 
oath of its treasurer or person performing the duties of the treas- 
urer, or by a duly authorized agent or officer: 

(1) The name aes cane within this state of the corpora- 
tion; and if it have no location in this state, where such corpora- 


tion is located. 


(2) The amount of its capital stock authorized and the 


16 amount outstanding, with the number of shares of each; and if 


Li 
18 
19 
20 
21 
22 
23 
24 
25 
26 


27 


there are different classes of stock, the amounts and number of 


shares of each class. 


(8) The average fair cash value of each class of its capital 
stock for three years next prior to the first day of the next pre- 
ceding January, or for such lesser time as the corporation has been | 
carrying on business: Provided, that until the year A. D. 1915 
such value shall be returned for one year prior to the first day of 
the next preceding j anuary. A majority of the board of directors, 
or the president, chairman, treasurer, assistant treasurer and 
secretary, or any two of such officers, or any duly authorized 


agent or officer, shall estimate and appraise the capital stock at its 


30 


28 


REPORT ON TAXATION LAWS. 


average fair cash value for such time. Such estimate shall be 


29 signed by the directors or officers or agent making it, and shall be 


30 


31 


32 


30 


34 


35 


attached to the corporate return. 


(4) The amount and value of its bonded indebtedness; and 
also the amount and value of its other indebtedness incurred for 
the acquisition of real, or of tangible personal property; and 
if at any time the board of tax commissioners believes that any 


other indebtedness is not bona fide but used as a cover for dis- 


36 tribution of profits, the board may require the return of the several 


37 


38 


39 


40 


Al 


42 


43 


44 


45 


46 


47 


classes of indebtedness. 


(5) The value as assessed for taxation in each town at the 
next prior assessment of its real and tangible personal property 
located in this state, including the value, as fixed by the town 


assessors, of any property exempt under any local exemption. 


(6) The location and the fair cash value of the real estate 
and tangible personal property, if any, used in its business, ana 
located outside this state, to the best knowledge and belief of the 
person making the return. And the return shall show whether 
the valuation returned is the value assessed for taxes in such other 


jurisdiction or is an estimated value. 


48 
| 49 
50 
ol 


52 


CO 


12 


13 


REPORT ON TAXATION LAWS. ol 

(7) A list of the securities and their values owned by said 
corporation as its own property, exempt from taxation by the 
laws of the United States or of this state, and of any others which 
the corporation claims to be exempt from taxation, and the reason 


for any such exemption. 


Sec. 10. The board of tax commissioners shall annually fix 
from the return, or from other information, the average fair cash 
value of each class of the capital stock of each corporation, for the 
said three years or lesser time the corporation has carried on 
business (except as otherwise provided in this act), and notify 
each corporation of such value on or before the first day of April 
in each year, and if any corporation is not satisfied with the 
valution so fixed, said board, upon being so notified within the first 
fifteen days of April, shall fix an early day at its office when its 
officers can be heard and show cause why said valuation should 
be changed, and after such hearing said board shall fix such valua- 
tion as appears to said board to be proper and in accordance with 


the rule for valuation in clause three of the next previous section. 


Src. 11. Each of the corporations required to make the 


return aforesaid shall be taxed upon the value of its intangible 


32 


iN 


14 


21 


22 


REPORT ON TAXATION LAWS. 
property or corporate excess, which shall be determined, for the 


purposes of assessment and taxation as follows: 


(1) To the value of the total number of its shares outstanding 
determined as aforesaid there shall be added, as part of the measure 
and value of the property of such corporation, the total value 
of its outstanding bonded indebtedness and also the amount of 
its other indebtedness incurred for the acquisition of real or of 
tangible personal property; and such other of its indebtedness, 
if any, as the board of tax commissioners finds is a cover for a 
division of the profits. 

(2) Inthe case of corporations also carrying on business out- 
side of this state, a portion of the value ascertained under the prior 
clause shall be apportioned to this state as follows: In the case 
of corporations deriving their profits principally from the owner- 
ship, sale, or rental of real estate, and in the case of manufacturing 
corporations and such other corporations as derive their profits 
principally from the sale or use of tangible personal property, 
such a proportion as the fair cash value of their real estate and 
tangible property in this state bit December thirty-first next 


preceding bears to the fair cash value of their entire real estate 


REPORT ON TAXATION LAWS. 3d 
and tangible personal property then used in their business, with- 
out any deduction on account of any mortgage or incumbrance 
thereon; in the case of corporations deriving their profits wholly or 
in part from the holding or sale of intangible property, and in the 
ease of corporations carrying on an express business, such a pro- 
portion as their gross receipts for the year ending on December 
thirty-first next preceding in this state bear to their total gross 
receipts for such year; in the case of a steam railroad corporation, 
such a proportion as the total mileage of tracks operated by such 
corporation for steam railroad purposes within this state, ex- 
elusive of sidings and turnouts, on December thirty-first next 
preceding, bears to the total mileage of such tracks then operated by 
said corporation for such purposes, both within and without this 
state; in the case of any corporation operating dining, sleeping, 
chair or parlor cars, but not in the case of a steam railroad cor- 
poration operating such cars as a portion of or incidental to its 
steam railroad business in this state, such a proportion as the 
number of miles such cars were operated in this state for the year 
ending on December thirty-first next preceding bears to the total 


number of miles such cars were operated for such period both 


2) 


34 


43 


44, 


45 


46 


47 


48 


49 


50 


dl 


52 


53 


54 


55 


56 


57 


58 


59 


60 


61 


62 


REPORT ON TAXATION LAWS. 
within and without this state; in the case of telegraph, cable and 
telephone corporations, such a proportion as the total mileage of 
wires operated by such corporation within this state on December 
thirty-first next preceding bears to the total number of miles such 
wires were then operated by such corporation both within and 
without this state; and in any other case to which these propor- 
tions are not equitably applicable, in such proportion as the board 
of tax commissioners shall find just. And said board shall have 
power to require, from time to time, such reports, sworn to as 
hereinbefore provided, as will give said board the information 


required under this act. 


(3) From the total value ascertained under the first clause 
of this section; or, in the case of corporations also carrying on 
business outside of this state, from the portion of the value ap- 
portioned to this state under the next preceding clause; there 
shall be deducted the assessed value of their real estate and tan- 
gible personal property located in this state as last assessed for 
local or state taxation, including in the deduction the value of 
any such property exempt from taxation by local authority. : 


(4) The board of tax commissioners shall also make such 


63 
64 
65 
66 


67 


68 
69 
MeL, 
Gl 
72 
73 
74 
75 
76 
1%, 
78 
79 
80 
81 


82 


REPORT ON TAXATION LAWS. ; 30 
allowance for any intangible personal property as is exempt from 
taxation, either by deducting it from the value of the entire 
capital of the corporation, or from the portion assigned to this 
state or the portion assigned to other jurisdictions, as the cir- 


cumstances make equitable 


(5) The remainder shall constitute the value of the intan- 
gible personal property or “corporate excess”’ for the taxation of 
said corporation. ‘The board of tax commissioners, on the first 
business day of June in tien year, shall make up a list of all cor- 
porations subject to tax upon their intangible property, with the 
amount of the corporate excess of each, and shall assess a tax 
upon each at the rate of thirty cents for each one hundred dollars 
of the amount of its corporate excess, and enter the amount of 
the tax against the name of each corporation. Said board shall 
certify to the correctness of such list and deliver a duly attested 
copy thereof to the general treasurer, who shall receive and collect 
the taxes so assessed. Said board shall also forthwith mail a 
notice of the amount of the tax to each such corporation, but the 
failure to receive such notice shall not excuse the non-payment of 


said tax. The tax assessed as aforesaid shall be payable on the 


36 


83 


84 


85 


86 


87 


88 


89 


REPORT ON TAXATION LAWS. 
first day of July next after its assessment as aforesaid, and if not 
paid by the fifteenth day of such July shall bear interest from the 
first day of such July at the rate of eight per centum per annum 
until paid, if such payment is made before the commencement of 
legal proceedings for the recovery of the tax, and at the rate of 
ten per centum per annum if made after the commencement of 


such proceedings. 


Sec. 12. Whenever the board of tax commissioners shall - 
ascertain that any corporation subject to the state tax upon its 
corporate excess has failed to make the return required by section 
nine of this act, they shall Srateetl to assess fhe tax from any 
information they can obtain os every prior year for which no 


return has been made, with interest as provided in the next pre- 


ceding section from the time at which the tax would have been 
payable. 
Sec. 13. The board of tax commissioners may at any time 


require further information from the officers and employees of 
any corporation which they may deem necessary to verify, explain, 
or correct any return made in accordance with section nine of 


this act and for the like purpose they, or their authorized agent, 


10 


11 


12 


REPORT ON TAXATION LAWS. oO” 
may examine its books of account during business hours, and in 
like manner may examine the officers, employees, and books of 
account of any corporation subject to the state tax upon its 
corporate excess which has not made the return required by section 
nine of this act for the purpose of determining the amount of tax 


to which it should be subject. 


Sec. 14. If any officer or employee of any corporation 
shall refuse to give to the tax commissioners or their authorized 
agent any information reasonably necessary for the determina- 
tion: of its taxable corporate excess, or refuse to permit any ex- 
amination of the books of the corporation, reasonably necessary 
for the purpose, the board of tax commissoiners may apply to 
the superior court for an order to compel such officer or employee 
to give such information or permit such examination, and the 
court may, after notice and opportunity for hearing the party 
complained of, make such order as is proper, and punish as for 
contempt any refusal or neglect to comply with such order., 
or if any such corporation shall fail to make the return required 
by section nine of this act, or any of its officers shall refuse any 


of the information or permission to examine its books as afore- 


38 


15 


10 


REPORT ON TAXATION LAWS. 
said, the superior court may, upon petition of the board of tax 
commissioners, restrain it from the further prosecution of its 
business until it has made such return, caused its officers to give 
the information, or permitted the examination of its books, as the 
case may be. And the pendency of either application or petition 


shall not be a bar to the other. 


Sec. 15. Nothing contained in the return of any corporation 
subject to the state tax upon its corporate excess, and no informa- 
tion obtained from any corporation or its officers or employees, 
either by examination of its books or otherwise, shall be open to 
public inspection, nor shall any portion of any such return, nor 
any information so obtained, except the value of the corporate 
excess as determined by the board of tax commissioners, and the 
tax thereon, be disclosed to any one not employed in the office 
of said board, except in proceedings involving the validity or 


proper amount of any such assessment or upon order of court. 


Sec. 16. If any tax commissioner or any other person shall 
unlawfully disclose any information contained in any return 
made by any corporation subject to the said tax, or any informa- 


tion obtained from any officer or from the books of any such 


On 


12 


13 


REPORT ON TAXATION LAWS. 39 
corporation, he shall be deemed guilty of a misdemeanor and be 


punished by a fine not exceeding five hundred dollars. 


Sec. 17. The board of tax commissioners is hereby authorized 
to require the return called for by section nine of this act to be 
made under oath, and to administer oaths in any inquiry made 
by either of them. And any officer or employee of any cor- 
poration subject to the state tax upon its corporate excess, who 

shall wilfully make any false statement in the return required 
by section nine of this act, or any false answer to any inquiry 
of a commissioner, or the authorized agent of said board, in the 
course of any inquiry material to the assessment of any such 
tax, shall upon conviction thereof be deemed guilty of perjury, 
if such statement or answer was made under oath, and if it was not 
made under oath he shall, upon conviction, be fined not exceed- 


ing five hundred dollars. 


Sec. 18. Any corporation which is aggrieved by the valuation 
of its capital stock or the tax assessed against it as finally fixed by 
the board of tax commissioners, as provided in section ten of this 
act, may, at any time after such assessment and prior to the ex- 


piration of three months after the time for the payment of the tax, 


40 


6 


7 


8 


9 


10 


11 


12 


13 


14 


15 


16 


(Je) 


REPORT ON TAXATION LAWS. 
petition the superior court for the counties of Providence and 
Bristol, or for the county in which the corporation is located, 
setting forth the reasons why said valuation or assessment is 
alleged to be erroneous and praying relief therefrom; and the clerk 
of such court shall thereupon issue a citation to summon the board 
of tax commissioners to answer said petition substantially in the 
form provided in section 15 of Chapter 58 of the general laws, 
and the court shall proceed to hear said petition and to determine 
whether said assessment was correct, but the pendency of such 
petition shall not before its final determination stay any proceed- 


ings for the collection of the tax. 


Sec. 19. If, upon the final determination of the petition, it 
shall appear that the petitioner, by reason of the payment of the 
tax, or binerice. is entitled to recover any sum of money, the 
court shall order its repayment, with interest at the rate of three 
per centum per annum; and the general treasurer shall pay such 
sum out of the treasury, on production of a certified copy of such 


order. 


Sec. 20. The owner of shares of stock or of bonds of any cor- 


poration liable to a tax upon its corporate excess under the fore- 


REPORT ON TAXATION LAWS. 41 
going provisions shall be exempt from taxation on account thereof; 
and the owner of any other indebtedness of any such corporation 
shall be exempt from taxation on account thereof whenever such 
other indebtedness forms a part of the corporate excess taxed to 
such corporation. The corporation paying such tax may pay the 
same out of the individual profit account of the owners of shares of 
stock or bonds of such corporation respectively in proportion to 
their ownership, or may charge the same to the accounts of the 
corporation, wholly or in part, as it may see fit. Such tax, if 
unpaid, shall constitute a lien upon the real estate of such cor- 
poration within this state for the space of two years after the 
assessment thereof, and, if such real estate be not aliened, then 


until the same is collected. 


TAXATION OF BANK SHARES. 

Sec. 21. All the shares of stock of any trust dials: or bank 
existing under the laws of this state (but not including savings 
banks), or banking association organized under the laws of the 
United States and located within this state, shall be annually 
assessed to the owners thereof by the board of tax commissioners, 


at their fair cash value on the business day next preceding the 
6 : 


42 


rf 


8 


9 


10 


ivi 


12 


15 


14 


15 


16 


ily 


18 


19 


20 


21 


22 


23 


24 


25 


26 


REPORT ON TAXATION LAWS. 
first day of January, first deducting therefrom the proportionate 
part of the value of the real estate then belonging to such trust 
company, bank or banking association, and shall be taxed at the 
uniform rate of thirty cents for each one hundred dollars of 
assessed valuation, being the same rate as other moneyed capital — 
in the hands of individual citizens of this state is by law taxed. 
The persons who appear from the books of such trust company, 
bank or banking association to be owners of shares therein at the 
close of such business day next preceding the first day of January 
shall be deemed to be the owners thereof. The board of tax com- 
missioners shall fix from the rola provided by this act, or from 
other information, the value of such shares, and notify such trust 
company, bank or banking association, acting as the agent of such 
shareholders, of such value on or before the first day of April 
in each year; and if any shareholder is not satisfied with the valua- 
tion so fixed, said board, upon being so notified within the first 
fifteen days of April, shall fix an early day at its office when such 
shareholder or any interested party can be heard and show cause 
why said valuation should be changed, and after such hearing 


said board shall fix such valuation as appears to said board to be 


27 


28 


bo 


17 


18 


IY 


REPORT ON TAXATION LAWS, 43 
proper and in accordance with the rule for valuation provided in 
this section. 

Sec. 22. Said board shall enter the amount of the tax against 
the name of each shareholder, shall certify to the correctness of 
such list, and deliver a duly attested copy thereof to the general 
treasurer, who shall receive and collect the taxes so assessed. 
Said board shall also forthwith mail a notice of the amount of 
such tax to each such trust company, bank and banking associa- 
tion acting for its shareholders respectively, but the failure to 
receive such notice shall not excuse the non-payment of said tax. 
Every such trust company, bank or banking association shall pay 
such tax so assessed tothe general treasurer on the first day of 
July next after the assessment as aforesaid, and if not paid by the 
fifteenth day of such July, said tax may be recovered from such 
bank and shall bear interest from the first day of such July at the 
rates respectively provided in section eleven of this act. The 
shares of such trust companies, banks and banking associations 
shall he subject to the tax so paid thereon, and such trust company, 
bank or banking association shall have a lien on all the shares, 
rights and property of any shareholder in the corporate property 


for the tax paid on such shareholder’s shares. 


44 


2 


3 


4 


5 


6 


11 


12 


REPORT ON TAXATION LAWS. 

Sec. 23. When such tax upon such shares held by persons 
without this state is collected by the general treasurer from such 
banking association organized under the laws of see United 
States, the general treasurer shall forthwith remit such tax to the 
collector of taxes or other person authorized to receive the same for | 
the city or town in which such banking association is located, 
the general treasurer acting as the agent of such city or town for 
the collection of such tax, and the tax of such non-resident upon 
such shares being deemed to be assessed to such owner thereof in 
the city or town where such banking association is located and 
not elsewhere. This construction is declared to be mandatory 


and not merely directory. 


Sec. 24. All the rights, powers, duties and privileges given 
and conferred, and any penalties imposed, in and by sections 
twelve to twenty inclusive of this act, shall exist and be imposed 
for or against all persons or corporations whatsoever, so far as 
applicable, in the assessment, payment and collection of all taxes 
under this act from such trust companies, banks or banking 
associations. The board of tax commissioners shall have power 


to require from such trust companies, banks and banking associa- 


10 


CO 


10 


11 


REPORT ON TAXATION LAWS. 45 
tions and its officers such sworn reports as will give such board the 
information required under this act. 

Sec. 25. Section one of Chapter 39 of the general laws is 
hereby amended to read as follows: 

“Section 1. A tax of nine cents on each one hundred dollars 
of the ratable property of the several towns as herein set forth shall 
be annually assessed, collected and paid by the several towns to 
the general treasurer, one-half thereof on or before the fifteenth 


day of June, and one-half thereof on or before the fifteenth day of 


December in each year.” 


Src. 26. Section three of said Chapter 39 of the general 
laws is hereby amended to read as follows: 

“Sec. 3. Every savings bank shall annually pay to the 
general treasurer thirty cents on each one hundred dollars depos- 
ited therewith, and on each one hundred dollars of reserve profits, 
said sums to be ascertained from a report to be made by such 
savings bank to the bank commissioner on or before the fifteenth 
day of July in each and every year, showing the total amount on 
deposit in such savings bank and the total amount of reserve 
profits therein on the last business day in June in such year, 


and to be paid on or before the first Monday in August.” 


46 


10 


11 


5 


6 


if 


REPORT ON TAXATION LAWS. 
Sec. 27. Section four of said Chapter 39 of the general 


laws is hereby amended to read as follows: 


“Sec. 4. Every bank and trust company shall annually pay 
to the general treasurer thirty cents on each one hundred dollars 
deposited therewith on participation or in the same manner as 
in savings banks, said sums to be ascertained from a report to be 


made by such bank or trust company to the bank commissioner 


on or before the fifteenth day in July of each and every year of the 
total amount of such deposits in such bank or trust company on 
the last business day in June in said year, and to be paid on or 


before the first Monday in August.” 
‘Src. 28. Sections twelve, thirteen, fourteen and fifteen of 
said Chapter 39 of the general laws are hereby repealed. — 


Suc. 29. Section nine of Chapter 57 of the general laws is 
hereby amended to read as follows: 

“Sec. 9. All ratable personal property, including the in- 
tangible personal property of any individual person, shall be 
taxed to the owner thereof in the town in which the owner shall 
have had his actual place of abode for the larger portion of the 


twelve months next preceding the first day in April in each year; 


18 


REPORT ON TAXATION LAWS. 47 
except as is otherwise provided by law and in the following 


clauses of this section: 


“First. The fixtures enumerated in section three of this 
chapter, all picking, carding, spooling, drawing, spinning, and 
reeling frames, dressing and warping machines, looms, tools, and 
machines of all sorts, propelled by steam, water, electric, or other 
power, in any factory, machine shop, print works, manufacturing 
or other establishment of any kind, and all live stock and farming 
tools on rena shall be taxed to the owner in the town where they 
are situated, in the same manner as if the owner resided there. 
All fixtures, tools, machinery, stock in livery stables, live stock, 
farming tools, goods, wares, merchandise, and other stock in trade, 
including stock in the business of manufacturing or of the me- 
chanic arts, and all other tangible personal property situated or 
being in any town, in or upon any store, mill, dock yard, piling 
ground, place for sale of property, shop, office, mine, quarry, fakin 
place of storage, manufactory, warehouse, or dwelling-house 
therein, belonging to any person, partnership, corporation, joint 
stock Re ai or association, shall be taxed to such person, part- 


nership, corporation, joint stock company, or association in the 


48 REPORT ON TAXATION LAWS. 

28 town where said property shall be or is situated. And if any 
29 tangible personal property aforesaid located in any town shall 
30 belong to any person, partnership, corporation, joint stock com- 
31 pany, or association, unknown to the assessors, it shall be taxed 
32 to the owner, a person unknown to the assessors; and the collector | 
_ 33 may distrain and sell such property in the same manner as pro- 
34 vided in Chapter 60 of the general laws; but nothing in this act 
35 contained shall be construed to impose any tax upon manufactured 
36 property owned by non-residents and brought into this state tem- 
37 porarily to be finished and returned to the owner. Persons, part- 
38 nerships, Ashes joint stock companies, or associations 
39 residing or located in this state, and owning tangible personal 
40 property located in and taxed in any other state, shall not be 
41 taxed therefor in this state. 

AQ “Second. No corporation subject to the state tax upon its 
43 the Er personal property shall be taxed for such property in 
44 any town. 

45 “Third. Intangible personal property belonging to any 
46 copartners shall be taxed to the copartnership in the town in 


47 which it carries on its business. If partners have places of busi- 


48 


49 


50 


51 


52 


53 


54 


55 


56 


57 


58 


59 


60 


61 


62 


63 


64 


65 


66 


67 


REPORT ON TAXATION LAWS. 49 
ness in two or more towns, such property shall: be equitably 
apportioned between the several towns in proportion to the 
tangible personal property in each town; and any deduction 
allowed for debts due from such partnership shall be deducted 


in each town in the ratio of the tax in such town. 


“Fourth. Intangible personal property belonging to persons 
under guardianship shall be taxed to the guardian in the town 
where the ward resides, if in this state; and if the ward does not 
reside in this state, in the town where the guardian resides, if a 


resident of this state. 


“Fifth. Intangible personal property held in trust by any 
executor, administrator, or trustee, whether under an express 
or implied trust, the income of which is to be paid to any other 
person, shall be taxed to such executor, administrator, or trustee 
in the town where such other person resides; but if such other 
person resides out of the state, then in the town where the execu- 
tor, administrator, or trustee resides; and if there be more than 
one such executor, administrator, or trustee, then in equal pro- 
portions to each of such executors, administrators, and trustees 


in the towns where they respectively reside. 
14 


50 
68 
69 
70 
71 
72 


73 


74 
75 
76 
oT 
78 
79 
80 
81 
82 
83 
84 
85 
86 


87 


REPORT ON TAXATION LAWS. 

“ Sixth. All other intangible personal property in the hands 
of executors or administrators shall be taxed to them in the town 
where the deceased person resided until such property shall have 
been distributed and some evidence of such distribution shall 
have been filed in the probate court or notice in writing thereof 


given to the assessors. 


“Seventh. Residents of this state shall not be taxed in this 
state for shares held by them in national banking-associations 
located without this state, the shares of which are taxed in the 
states where such national banking-associations are located. 

‘“‘Highth. No shareholder shall be taxed for shares held in, 
and no bondholder shall be taxed for bonds of, any corporation 
liable to taxation under the laws of this state imposing a tax 
upon the intangible personal property of such corporation; and 
no shareholder shall be taxed for shares held in any other cor- 
poration within or without this state, or banking-association 
within or without this state, which in its corporate capacity 7 
taxed for an amount equal to the value of its real estate and tan- 
gible personal property, and equal to the market value of its 


shares; but in case such corporation or association is taxed for 


88 


89 


90 


91 


92 


93 


94 


95 


96 


97 


98 


99 


REPORT ON TAXATION LAWS. 51 
less than said amount, such shareholder shall be taxed only for the 
difference between the market value of each share by him held 
and the proportionate amount per share at which the corporation 


was last assessed as aforesaid. 


“Ninth. Intangible personal property, liable to taxation, of 
any religious or benevolent society shall be taxed in the town 


where the corporation holds its meetings. 


“Tenth. No persons, copartnerships, or bodies corporate 
resident of this state shall be liable to taxation on money on hand 
at interest, or on deposit, or on debts due from others except upon 
the surplus of such property over and above their actual indebted- 


ness; but in making allowance for the indebtedness of such per- 


100 sons, copartnerships, and bodies corporate, no deduction shall be 


101 made for any liability as endorser or surety or other contingent 


102 liability, nor exceeding his, their, or its pro rata amount of any 


103 joint indebtedness; nor shall any liability as a partner be de- 


104 ducted from the taxpayer’s individual property, nor an individ- 


105 ual indebtedness be deducted from copartnership property. 


106 This clause shall not apply to corporations paying a tax upon 


107 their corporate excess. 


52 REPORT ON TAXATION LAWS. 
108 “Tf no executor of the will of, or no administrator of the 
109 estate of, a deceased person shall have been appointed, the per- 
110 sonal property of said deceased person, both tangible and in- 
111 tangible, liable to taxation, shall be assessed as the estate of 
112 said deceased person, and the executor or administrator sub- 
113 sequently appointed shall be liable as such for so much of the 
114 tax as shall prove to be not in excess of the tax upon the amount 
115 for which said estate is properly taxed. The personal Se 
116 erty of any minor not under guardianship shall be assessed to — 
117 such minor, and such minor shall be liable for so much of the 
118 tax, notwithstanding his minority, as he cannot prove to be in 
119 excess of the amount for which he is properly taxable.” 

Sec. 30. Ghaptes 57 of the general laws is hereby amended 


2 by adding the following section: 


3 “Sec. 11. Money on hand, at interest or on deposit, feb 
4 due to the person or copartnership to be taxed over the amount 
5 such person or copartnership is indebted, including in any deduc- 
6 tion debts secured by mortgage given by such person or co- 
7 partnership; government, state and municipal bonds and securi- 


8 ties not exempt from taxation by the laws of the United States or 


, 


REPORT ON TAXATION LAWS. 53 
9 of this state; the stocks, bonds and securities of all corporations 
10 carrying on business for profit in this state which are not specially 
11 exempted from taxation by the laws of this state; the stocks, 
12 bonds and erties of all corporations which do not carry on 
13 business for profit in this state; debts due the person or copart- 
14 nership to be taxed secured by mortgage; and all other intangible 
15 personal property—shall be taxed at the uniform rate of thirty 

16 cents for each one hundred dollars of assessed valuation.” 
Sec. 31. Section five of Chapter 58 of the general laws is 

‘2 hereby amended to read as follows: 

3 “Sec. 5. The cashier or treasurer, or the officer discharging 
4 such duties, of any trust company, bank or banking association 
5 existing under the laws of this state or of the United States and 
6 located within this state, shall annually, on or before the first 
7 day of March, make and deliver to the board of tax commis- 
8 sioners a statement, sworn to by such officer, showing the name of 
9 each shareholder with his residence and the number of shares 
10 belonging to him at the close of the business day next preceding 
cay) ue first day of January of such year, with the fair cash value of 


12 its shares, and the location and fair cash value of any real estate 


54 REPORT ON TAXATION LAWS. 
13 belonging to such trust company, bank or banking-association, 
14 all on said last mentioned date. If such officer fails to make such 
15 statement by said first day of March, said board shall forthwith ~ 
16 obtain a list of the names and residences of such shareholders and 
17 the number of shares belonging to each, and the location and fair 
18 cash value of such real estate, as aforesaid.” 
Src. 32. Section eight of said Chapter 58 of the general laws 
2 is hereby amended to read as follows: 
3 “Sec. 8. The assessors shall make a list containing the true, 
4 full and fair cash value of all the ratable estate in the town, 
5 placing real estate, tangible personal property, and intangible 
6 personal property in separate columns, and distinguishing those 
7 who give in an account from those who do not, and shall apportion 
8 the tax accordingly.” 
Sec. 33. Section two of Chapter 60 of the general laws is 
2 hereby amended to read as follows: 
3 “Sec. 2. All taxes assessed against any person or copartner- 
4 ship in any town for either personal or real estate shall constitute 
5 a lien on his or its real estate therein.” 
SEC. 34. Section 23 of Chapter 203 of the general laws is 


2 hereby amended to read as follows: 


REPORT ON TAXATION LAWS. 5d 

“Sec. 23. The oysters planted or growing in any private 
oyster ground leased as aforesaid shall, during the continuance of 
the lease, be the personal property of the lessee of such oyster- 
ground. All lessees of shell-fish grounds lying within the exclusive 
jurisdiction of the state shall annually, on or before the first day 
of March, deliver to the commissioners of shell fisheries a state- 
ment under oath, specifying the number, area and location of the 
lots or parcels of such grounds held by them under lease from said 
commissioners on December thirty-first next preceding, together 
with the number of acres and the value thereof per acre and in 
the aggregate on such last named date. Printed blanks for such 
statements shall be prepared by said commissioners and supplied 
to such lessees on or before the first day of February next pre- 
ceding; and upon the failure of any lessee to deliver such sworn 
statement to said commissioners on or before the date herein 
specified, said commissioners shall make up such statement from 
any information they can obtain. Said commissioners shall 
annually, on the first een day of June next succeeding, 
determine the value of all the property so returned and described 


in said statements, and shall assess a tax, based upon the valuation 


56 REPORT ON TAXATION LAWS. 
23 so determined, at the rate of one per centum. Said commis- 
24 sioners shall thereupon make up a list of all lessees of shell-fish 
25 grounds subject to the tax Hera provided, with the amount of 
26 tax assessed against each, which tax shall become due and payable 
27 on the first day of July next succeeding and shall be received and 
28 collected by said commissioners of shell fisheries and turned 
29 over to the general treasurer. The commissioners of shell fish- 
30 eries shall also forthwith mail a notice of the aniount of the tax 
31 to each such lessee, but the failure to receive such notice shall not 
32 excuse the non-payment of said tax. Any tax assessed against 
33 any lessee which shall remain unpaid after the fifteenth day of 
34 such July shall bear interest from the first day of such July at the 
35 rate of eight per centum per annum until paid; and the commission- 
36 ers of shell fisheries may proceed to enforce the collection of any tax 
37 assessed under this section, with accrued interest, in like manner 
38 as provided in section twenty-six of this chapter for the collection 
39 of rents. Any lessee of shell-fish grounds who is aggrieved by any 
40 valuation or assessment made under the provisions of this section 
41 may at any time prior to the expiration of three months after the 


42 time the tax thus assessed shall become due and payable, petition 


REPORT ON TAXATION LAWS. — 57 
43 the superior court for the counties of Providence and Bristol, or 
44 for the county in which the property or any part thereof so valued 
45 and assessed is located, setting forth the reasons why such valua- 
46 tion or assessment is alleged to be erroneous and praying relief 
47 therefrom; and the clerk of such court shall thereupon issue a 
48 citation to summon the commissioners of shell fisheries to ariswer 
49 said petition, substantially in the form provided in section fifteen 
50 of Chapter 58 of the general laws, and the court shall: proceed 
51 to hear said petition and to determine whether said assessment 
52 was correct, but the pendency of such petition shall not before 
53 its final determination stay any proceedings for the collection of 


54 the tax.”’ 


Src. 35. Section four of Chapter 215 of the general laws is 


2 hereby amended to read as follows: 


3 “Sec. 4. The total annual expense, including salary, of the 
4 railroad commissioner, excepting only the cost of printing and 
5 Rane the annual report required by law to be made to the gen- 
6 eral assembly, shall not exceed four thousand dollars.” 

Sec. 36. Sections one to six, inclusive, of this act shall take 


2 effect upon its passage; sections seven to thirty-five, inclusive, 
8 


58 


REPORT ON TAXATION LAWS. 

shall take effect on the thirtieth day of December, A. D. 1911; 
and all acts and parts of acts, whether general or special, which 
are repugnant to the provisions hereinbefore contained, shall 
thereafter be repealed; but Rich repeal shall not affect the col- 
lection of any tax theretofore assessed, or any right accrued with 
respect to any tax theretofore assessed, or any suit or any pro- 
ceeding commenced before the time when such repeal shall take 
effect: Provided, however, that no provision of the general or 
public laws for the imposition of a tax which is not specifically 
amended by this act, or is not directly in conflict with or re- 
pugnant to the provisions hereof, shall be construed to have been 
repealed, modified or affected hereby or hereunder, but the taxes 
authorized to be assessed and collected under this act shall in 
every such case be considered to be in addition to the taxes pro- 
vided to be assessed under the general laws and the several acts 


in amendment thereof and in addition thereto; excepting that the 


provisions of sections nine to twenty-four, inclusive, of this act. 


shall not apply to corporations, joint stock companies or associa- 
tions organized for religious, charitable or literary purposes, or 
to any corporation expressly exempt from taxation by its charter 


or by the general laws or public laws of this state. 


4 
+ 


1 | 


a A aaa 


